The above quote is now referred to as Amara's 'law' and was coined sometime in the 1960s by Roy Amara, Stanford University computer scientist and long-time head of the Institute for the Future. In current times of technology disruption and ultra-fast adoption cycles, the quote has never been so resonant.
In many respects, the idea behind thematic investing is to capitalise on the latter part of the quote - and can be seen as 'investing in the future'.
The rise and rise of globalisation, driven particularly by digital technology, has accelerated the adoption of emerging megatrends faster than ever before. For a practitioner, therefore, while of course one will always invest in the core asset building blocks such as bonds, domestic and global equities, and cash, there is potentially a strong case to be made to invest in companies and sectors that are poised to benefit from structural changes in the global economy.
What is thematic investing?
Thematic investing is a forward-looking investment approach that capitalises on megatrends and structural changes. Some megatrends are so structurally ingrained in the economy that they are all but certain to occur in time. The impact of climate change, ageing demographics and disruptive innovations can be thought of as a paradigm shift from existing models which has important investment implications.
The investment management industry has established and popularised various investment approaches such as passive, smart beta and factor investing. Thematic investing, while a far newer approach, nonetheless is worthy of consideration. It allows an adviser to position clients' portfolios for a future that may look completely different to anything we are accustomed to.